Lands’ End is on firmer turf — and showing greater confidence in its business.
Despite a drop in fourth-quarter net profits and sales, Lands’ End continues to make progress in its turnaround being led by Jerome Squire Griffith. He’s been president and chief executive officer of the Dodgeville, Wisc.-based classic American clothing brand for the past two years.
“We’re maybe in the fourth or fifth inning,” of the turnaround, Griffith told WWD on Thursday, just after the company reported its fourth quarter and year-end results. “We’re halfway through where we need to be in getting our product right for our consumer. We are moving along pretty well there. We’re very key-item-driven — designing and buying toward this, and the marketing team is involved in maximizing this.”
On the digital side of the business, “We have instituted a test-and-learn culture,” Griffith said. “We did five times as many tests last year as the year before.” He said the company is investing in search engine optimization, price clarity, warehouse enterprise system that will enable buy online pick up in stores and buy online, ship to stores.
This year, Lands’ End should reach a milestone — no more shops inside Sears. There are just 49 Sears locations that house Lands’ End shops. That’s 120 fewer than a year ago. Next week, another 10 will close. “The shops will be gone by the end of the year,” Griffith stated. Lands’ End in 2002 was bought by Sears Corp. and spun off as a public company in 2014.
To help offset that revenue loss, Lands’ End continues its new strategy of the last few seasons to open company-owned stores. The 18th opened Thursday, in Pittsburgh. “By the end of the year another 10 to 15 stores will open. We expect to be operating between 60 and 75 stores by the end of 2022,” Griffith said during the interview.
In a conference call later, Griffith elaborated on his brick and mortar philosophy. “I have never been a fan of opening up stores just to make yourself pretty. They need to be profitable. They are and they will be. I don’t believe you look at four-wall EBIT and say this makes a store good or not. Customers interact with us in the store and also interact online. Inside the stores employees carry iPads and there are kiosks so you can interact with us online in the stores. Based on the size of the stores, there’s no way they can carry the full line but we make the full line available to them in a different way.”
Lands’ End opts for stores in suburban settings that customers can drive right up to, and in or around zip codes where there’s already a base of customers shopping Lands’ End online or in catalogues.
The brand is also increasing its presence on marketplaces. On Wednesday, Lands’ End went live on walmart.com. Lands’ End has been selling on Amazon, which represents 1 percent of Lands’ End U.S. e-commerce volume. Lands’ End is also sold on Amazon in the U.K. and Germany.
With Amazon, “We’re getting a new customer,” Griffith noted. “Fifty percent never heard of, or shopped at, Lands’ End. Another 25 percent have not shopped Lands’ End for between one and five years.” He described Lands’ End customers on Amazon, as “a slightly younger customer, and slightly more male.” Selections on Amazon tend to be the same as what customers select from Lands’ End via other channels.
Lands’ End has been enhancing its website experience by making it faster, investing in search engine optimization and taking a stronger focus on social media, leading to a $10 million to $15 million increase in the marketing spend this year, and a higher profile.
On the other hand, “We continue to downplay catalogues even though they bring traffic to the website,” Griffith said during a conference call Thursday. “We’re cutting down on pages and circulation and moving more dollars to digital.” Lands’ End also has a significant outfitting business, supplying schools as well as American Airlines, Delta Airlines, AT&T and Chase.
Best-sellers have been outerwear, swimwear, sleepwear and bottoms, as well as special sizes, knitwear layering and home products. “Heritage” products which include squall jackets, colored duffle bags and rugby shirts, are also selling well.
Asked how spring business is progressing, Griffith answered, “So far so good, but it’s early days. Swimwear is OK. Knit tops have been pretty phenomenal. But it’s been cold so it’s a little early for me to say, plus you have the Easter shift,” to April 21 from April 1 last year.
For 2018 overall, Lands’ End’s volume which rose 3.2 percent to $1.45 billion compared to $1.41 billion the year before. Excluding the sales from the 53rd week and $48.7 million from closed Sears stores, revenues would have increased 9 percent in 2018.
Net income for 2018 was $11.6 million, compared to $28.2 million the year before which included a tax benefit of $27.7 million primarily due to tax reform. However, adjusted earnings before interest, taxes, depreciation and amortization grew 20.9 percent to $70.5 million compared to $58.3 million in fiscal 2017.
Griffith characterized 2018 as “another year of significant progress with strong fourth quarter financial results” and listed the four top priorities as staying focused on key items, operating as a digitally led company, leveraging uni-channel distribution and improving business processes.
With renewed confidence in the business, Lands’ End reinstituted forecasting. For the first quarter, net revenues are seen reaching between $255 million and $265 million and there’s an expected net loss of between $8.5 million and $11 million and diluted loss per share of between $0.26 and $0.34. Adjusted EBITDA is seen in the range of zero to $3 million.
For all of 2019, the company expects net revenues of between $1.45 billion and $1.5 billion; net income between $8 million and $14 million, and diluted earnings per share of between 25 cents and 45 cents. Adjusted EBITDA is seen in the range of $70 to $80 million. Lands’ End goal is to reach $1.8 billion to $2 billion in annual revenue and a high, single-digit EBITDA margin rate by 2022.